The ATO is concerned that foreign residents are selling Australian Property and leaving the Country without paying Capital Gains Tax etc.
The ATO has New Withholding Tax rules for sales of property where contracts are entered into on or after 1 July 2016 and the property has a market value of $2 million or more. Unless the Seller obtains an ATO clearance certificate and gives it to the Buyer before settlement, Withholding Tax of 10 percent of the sale price or value must be deducted by the Buyer from the settlement monies and paid by the Buyer to the ATO upon settlement.
This means Australian residents who are selling (or are intending to sell) Australian property with a market value of $2 million or more need to apply to the ATO for a clearance certificate from the ATO that will confirm that the requirement for a 10 per cent withholding amount does not apply to the transaction.
If a Seller does not provide a clearance certificate to the Buyer by settlement, the Buyer will be required to withhold 10 per cent of the sale price or value and pay that money to the ATO.
Where a Buyer fails to withhold when they should, a penalty may be equal to the amount that was required to be withheld and paid plus Interest.
The ATO withholds the amount paid to the ATO as a credit to the Seller against tax payable by the Seller.
A clearance certificate is valid for 12 months from issue, and must be valid at the time it is made available to the Buyer.
For more information and assistance contact: David Kerr, KERR LAWYERS